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19th July 2016

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SGX to hive off regulatory functions

In a move welcomed by market watchers as long overdue, the Singapore Exchange (SGX) said on Monday that it is hiving off its regulatory arm from its commercial activities. A new company temporarily dubbed RegCo will be set up as an SGX subsidiary by the second half of next year. It will house SGX's current regulatory team of around 100 people. RegCo will be run by current SGX chief regulatory officer Tan Boon Gin, who reports directly to a board separate from the exchange. Central bank and regulator Monetary Authority of Singapore (MAS) will ensure SGX gives RegCo adequate resources for its duties.

Three days after SMRT Corp unveiled the long-awaited details of a new rail plan that will turn it into an asset-light operator, its majority owner Temasek Holdings is doing the math for a possible takeover of the transport firm. Sources say Temasek, which owns 54 per cent of SMRT, is mulling taking the company private. Speculation - as it remains so for now - pushed the rumour mill into overdrive on Monday.

Singaporeans' expectation of inflation has fallen to its lowest level since September 2011 on the back of global economic headwinds and the fallout from "Brexit". The median one-year-ahead headline inflation among polled Singaporean consumers, that is, their expectation of inflation in the medium term, fell from 2.79 per cent in March to 2.63 per cent last month. Results were based on research findings of the latest quarterly survey for the Singapore Index of Inflation Expectations (SInDEx) by the Singapore Management University (SMU).

Exports plummeted back to earth last month after skyrocketing 11.6 per cent in May, with shipments to key markets dropping. Sluggish global growth continued to take a toll on Singapore's exports to its two largest markets - China and the European Union - and Indonesia. Non-oil domestic exports (NODX) fell 2.3 per cent last month compared with the same month last year, although that did beat market forecasts of a 3 per cent drop. Shipments of electronic and non-electronic goods both fell. Electronic exports contracted 1.7 per cent year on year last month, narrowing from a 6 per cent decline in May, while non-electronic shipments shrank 2.5 per cent from May's 19 per cent expansion.

Visitors to Sentosa have two new attractions to look forward to, including a new site to be developed into a nature-based adventure attraction. Sentosa Development Corporation (SDC) is calling for proposals to develop a 9,420 sq m forested area, located on a slope connecting Imbiah Lookout to Siloso Beach, into an attraction for thrill-seekers and nature lovers. The flying trapeze and Trapizza restaurant at Siloso Beach Walk, run by Shangri-La's Rasa Sentosa, will make way for a new attraction when its lease ends in the coming months. A tender for the 2,760 sq m site was called last month for an attraction with ancillary food and beverage and/or retail offerings.

Sales were brisk at the Treasure Crest executive condominium (EC) showflat over the weekend with nearly 72 per cent of the units snapped up. Developer Sim Lian Group said 362 out of the 504 homes at the project in Anchorvale Crescent found buyers over the two days, with all 56 four-bedroom units selling out. It said in a statement that most of the buyers are living in the north-east region, mainly Punggol, Sengkang and Hougang. Sim Lian noted that about 62 per cent of the units sold were booked by first-time buyers with the rest bought by HDB upgraders. While the sales figure was healthy, it was still well below the number who expressed interest during a 10-day e-application period that ended on July 10. The project was more than 2.1 times subscribed with 1,077 e-applications lodged.

One brokerage has given a "do not participate" call for the upcoming initial public offering (IPO) of EC World Reit, a Chinese logistics-focused real estate investment trust (Reit). Religare cited the need for a higher yield to compensate for the many downside risks, including its cross-border risks. The report's author, Tata Goeyardi, director of Asean sales, listed the risks as: the weakening supply and demand of steel which may affect the long-term growth prospects of Chongxian Port Investment (which makes up a third of the Reit's valuation), and the concentration risks that the Reit is exposed to from being a pure play in China.

Keppel DC Reit posted a 3.1 per cent rise in distribution per unit (DPU) for the second quarter ended June 30 to 1.67 Singapore cents, on the back of lower property expenses. Lower gross revenue in the second quarter, which fell 4.5 per cent from a year ago to S$24.87 million, was mitigated by a 32.7 per cent slide in property expenses to S$2.76 million. The Reit declared a total DPU of 3.34 Singapore cents for the first half ended June 30, which marks a 3.4 per cent increase from a year ago. It will be paid out on Aug 31.

Keppel Infrastructure Trust (KIT) on Monday posted a second quarter distribution per unit (DPU) of 0.93 Singapore cents, on par with what it paid out a year ago. This will be paid on August 19. The book closure date is July 26. For the three months ended June 30, revenue fell 10.2 per cent to S$137.4 million, due to lower contributions from its various segments.

Warehousing and logistics firm GKE Corporation has awarded HPC Builders a contract to redevelop its property at 39, Benoi Road. The project is expected to be completed before August next year. The work will expand the site's warehousing space by 200,000 sq ft to a total of 400,000 sq ft and add an open yard storage space of 130,000 sq ft. This will in turn increase GKE's aggregate warehousing space to 1.2 million sq ft and open yard storage space to 328,000 sq ft, the firm said yesterday. GKE chief executive Neo Cheow Hui said the project will provide cost-savings. GKE shares closed down 0.2 cent, or 1.98 per cent, at 9.9 cents yesterday.

Buy land: They're not making it anymore. That often repeated adage sounds like good financial advice. But over the long run, it hasn't been. Despite solid price increases over the last few years, land and homes have actually been disappointing investments. Let's start by looking at the numbers. The best long-term data on land in the US is for farmland, which is valuable in its own right and can also be considered a great reservoir that can be converted to housing and other purposes at opportune times.

In recent weeks, attacks have taken place at a nightclub in Orlando, a restaurant in Dhaka, and on crowds at a promenade in Nice. With Singapore also facing the threat of terrorism, the police want some of the more vulnerable and crowded establishments here - especially retail malls - to shore up their defences. "Moving forward, the police will be engaging the management of commercial buildings, including retail malls, to develop contingency plans and conduct joint exercises to enhance their readiness to deal with any attack," said Mr Melvin Yong, an MP for Tanjong Pagar GRC.

Singapore has too many shopping malls in an age of rising e-commerce, and the changing nature of employment is threatening the office space market. So far, the only property segment that has not been "disrupted" is residential, says investment group CLSA. In fact, the rise of room-rental booking site Airbnb has "dislocated value away from hotel assets towards residential assets", noted CLSA head of Singapore research Jonathan Galligan. "Airbnb is a very good example of how disruption is dislocating asset values," he said, because when hotel room rates get displaced by short-term rents, hotel and residential yields change. While CLSA expects a regulated short-stay market here to have very little impact on the residential property market, it believes Airbnb and Airbnb-like websites pose a clear threat to hotels and hotel owners.

While Temasek Holdings is said to be considering a buyout of SMRT - just days after the Government announced it will take over the transport operator's rail assets - it is unlikely to be a move towards nationalisation, said analysts. This is because the Government intends to keep the rail market contestable and to retender the operation of rail lines more often, they pointed out. SIM University economist Walter Theseira said: "For nationalisation to occur, SMRT will have to be delisted and turned into a statutory corporation under the Land Transport Authority's (LTA) or Ministry of Transport's control.

Singapore dollar bondholders, already stung by the first default since 2009, face more companies struggling to meet the terms of their debt, after two oil and gas companies sought to extend maturities. AusGroup Ltd and Otto Marine Ltd are among 10 Singapore-listed firms that have started a process to loosen bond vows this year, up from eight in 2015, according to Bloomberg-compiled data. That includes efforts to extend the maturity of debt and loosen covenants requiring companies to maintain certain leverage levels. Oil-related firms face S$1.4 billion of Singapore dollar bonds maturing through 2018, with S$325 million due by the end of the year, according to Bloomberg-compiled data.

In what is really welcome news, consumer satisfaction with Singapore's key retail and infocommunications sectors has risen significantly, according to a new survey by the Institute of Service Excellence at Singapore Management University (ISES). Statistically significant upticks were recorded by the two important sectors in the first three months of the year compared to a year ago. The retail and infocomm sectors were bolstered by improvements in satisfaction levels in the jewellery, fashion apparel, department store, Wireless@SG and broadband sub-sectors.